Rely On Data: 2024 Self-Storage Real Estate Market Value

This is the rental income the industry would produce if every facility in the country was 100 percent occupied at average street rates. To estimate the GPI of the industry, I’ve multiplied the 2024 average annual street rate per square foot by total rentable square feet in the U.S. TractIQ tracks online street rate data for over 26,000 facilities in the country.

 

GPI also includes ancillary income from fees, insurance, billboards, retail sales, and other items. Ancillary income ranges anywhere from 0 percent of storage rental income to more than 10 percent of storage rental income, depending on the location and operator of the property. The four publicly traded REITs (Extra Space, CubeSmart, Public Storage, NSA) have ancillary income percentages that range from 4 percent to 12 percent, based on their Q3 2024 public filings. I’ve used 3 percent in my analysis as REITs represent a smaller portion of the overall industry. In addition, the 2024 Self-Storage Almanac uses 3 percent for ancillary income in their due diligence section.

 

Realistically, one could also apply an “achieved rate premium” to GPI, as this analysis is only utilizing street rates. The trend in 2024 showed that achieved rates were typically higher than street rates due to existing customer rate increases (ECRIs). For example, according to TractIQ’s Q3 Self-Storage REIT Report, REIT achieved rates were on average 15.6 percent higher than REIT street rates. I’ve intentionally left out applying an “achieved rate premium” to GPI because REITs only represent a fraction of the total industry, and this assumption is difficult to quantify and apply across every facility in the U.S. If you’d like to experiment with how this changes, I’ve made the model and all assumptions available here.

 

This is the net revenue generated by the industry after applying vacancy and collection loss to GPI above. According to the 2024 Self-Storage Almanac, the national occupancy for self-storage in 2023 was 91.6 percent. For reference, the publicly traded storage REITs’ average occupancy rates for the nine months ending Sept. 30, 2024, ranged from 85.8 percent to 92.2 percent. I’ve used an 88 percent occupancy rate in my analysis to account for collection loss in addition to physical vacancy.

 

Now that we’ve covered income, it’s important to consider what it costs to keep a facility operating efficiently. Typical costs associated with operating a self-storage facility include property taxes, insurance, management fees, payroll, utilities, repairs, maintenance, administration, and advertising, among other items. According to the 2024 Self-Storage Expense Guidebook, the national operating expense ratio for self-storage facilities is 34.68 percent. I’ve applied a 35 percent operating expense ratio to EGI to estimate the total expenses of the self-storage industry. For reference, the publicly traded storage REITs’ expense ratios for the nine months ending Sept. 30, 2024, ranged from 26.0 percent to 31.4 percent.

 

To effectively estimate the total value of the real estate for the self-storage industry, we must apply a cap rate to the industry’s NOI (EGI minus expenses). I’ve applied a 5.50 percent cap rate to the NOI, but the sensitivity table shows how the value of the industry changes based on different cap rates and expense ratios.

 

 

To give some context, the Comparison table compares the size of the self-storage industry to other asset classes.

 

 

Although self-storage may be viewed as the “little brother” of the commercial real estate industry, returns have consistently outperformed in recent history, driving more money and attention to the space. Will this trend continue throughout 2025? Will self-storage still be a “hot” asset class? No one can predict the future, especially as the storage industry currently combats oversupply and dampened demand—all the more reason to rely on data when making investments decisions throughout every market cycle.

 

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